US asbestos a threat, admits ABB

By Adam Jay

12:01AM BST 03 Jul 2003

ABB, Europe's biggest engineering group, has admitted that its very survival is threatened by its ongoing American asbestos court case.

In a document filed with the US Securities and Exchange Commission (SEC), the Swiss-Swedish company complained that a drawn-out appeals process against a settlement sanctioned last month could make it impossible to raise fresh capital.

ABB said in the filing: "If we are unable to reduce our indebtedness, we may be unable to fund our obligations when due and may therefore be unable to continue as a going concern."

The asbestos claims relate to the company's US subsidiary Combustion Engineering, which filed for Chapter 11 protection in February. Last week a bankruptcy court in Delaware provisionally agreed to cap liability claims at $1.2 billion (£720m), but requested further information.

A final ruling, which may be delayed until next month, must be approved by a federal court and can then be appealed by any of the 100,000 victims. A lawyer for hundreds of claimants has already indicated he will appeal, which could prolong the process by up to two years.

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ABB also told the SEC that an internal investigation into its African Oil, Gas and Petrochemicals unit (OGP) had revealed improper payments to local officials. ABB is trying to sell OGP in an effort to reduce debts that total $8 billion.

An investigation by the SEC could upset the sale process, though ABB said it had not heard from the commission, or from the Department of Justice, over what action, if any, they proposed to take over the "voluntary disclosure".

Just last week, Jurgen Dormann, the ABB chief executive and chairman, sought to reassure investors that the company would not be hit by another crisis over the slow progress of proposed divestments.